2 Year Yield is Secretariat
Source: Google Images
Secretariat was the 9th winner of the Triple Crown, still holds the records for the fastest times in each of those races (Kentucky Derby, Preakness, and Belmont Stakes), was the winner of 11 Stakes races, and is believed to be one of the greatest thoroughbreds of all time.
The 2-year Treasury yield, which is running its fastest race ever, is today’s Secretariat. The yield, which is currently at .70%, is 180% above its 200-day moving average (bottom chart). This is its greatest overbought reading of all-time.
Source: 22V Research
There is truly an incredible disconnect occurring with the 2-year impersonating Big Red and the 10-year Treasury yield below its spring 2021 high, its Oct 2021 high, and its Nov 2021 high. There isn’t an investor extant who could have thought the Fed would (still) run an emergency playbook of Fed Funds at 0, plus QE (we know tapering is to start shortly, but stick with us for a second), with very strong GDP growth, and the CPI at its highest level in 31 years, and the PPI at its highest level in 41 years and, then, not be astonished that this type of price dislocation is occurring. Make no mistake, the 2’s are very overbought, but we continue to expect it will get to 1% and believe a 2% target is not out of the question.
